Today, few of us in the Caribbean give more than a superficial thought to energy. Aside from the usual two days of radio talk that follow every price hike, most of us hardly ever discuss the subject and even worse remain disengaged from the process by which decisions related to energy are made. For whatever reason, we seem to assume that we have no control over how energy is sourced, distributed or sold, and that issues related to energy are highly technical and best left to experts in Government, the utilities, gas station dealers, engineers, economists etc. The role of the majority has simply been that of flicking the switch, filling up the tank and paying the bills.
From my own research, energy costs can be as much as much as 20% of the average Antiguan and Barbudan household budget – electricity, gas and LPG expenses. Today, the retail price of gas is 30% higher than a year ago, while the average fuel variation charge in 2011 is 15% more than it was 2010. In the recently released World Economic Outlook, the International Monetary Fund (IMF) cites a jump in food and oil prices as the biggest downside risk for commodity importing countries such as ours. Since we import 100% of the energy inputs as refined petroleum products – and I might add, a significant portion of our food – the risks to our economy and way of living are indeed real. Clearly, there are very compelling economic reasons for everyone; not only policymakers and utilities, to be concerned about energy.
For many years the Caribbean has been plagued by high and volatile fuel prices, with limited economies of scale or diversity of electricity supply. Notwithstanding years of policy statements, studies and pilot projects, the reality on the ground remains unchanged. In present day, electricity prices are among the highest in the world. The reasons for this are many and although the most common explanation offered by players in the energy sector suggest the price of oil and our small size as the main causes, some would argue that our capacity for energy production is no less than that for food production. The economic imperatives for indigenous energy sources, I would add, are perhaps even greater that food.
If you ask most players in the energy sector why there isn’t faster adoption of renewable energies in the Caribbean, they will quickly say that they are too expensive. Ask how much they cost, and you will be lucky to get an answer. That’s because renewable energy technologies are in fact a number of very different technologies grouped together for convenience. Some, like solar and wind are intermittent while some – e.g. geothermal – can provide a constant steady supply. Some are applicable for small scale distributed generation, while others are only suited for large utility scale projects. Some technologies are mature with predictable performance over time, while others are still in the early stage of development with a lot of unknowns. To complicate matters, there are up front costs, running costs, and environmental costs; all of which vary by technology, time and location. If you ask three experts in the field for the cost of energy from a particular renewable energy technology, it is likely that you will get three different answers. The truth is, there are enough moving parts that go into the price of renewables to make your head spin.
I humbly suggest that the main reason why Caribbean utilities and Governments have not acted more aggressively in adopting renewable energy is due to one thing: uncertainty. Think about it - why should a utility radically change a business model that works with a guaranteed, regulated return on investment when the alternative is filled with so many unknowns? Why should governments risk disrupting an energy system that is reasonably reliable and remains accessible – at least for the time being - to the average consumer? Let’s face it; these are serious questions that can’t be brushed aside. While there is no doubt a level of social consensus on the need to diversify our energy supply, far more engagement from the public will be needed to help our policymakers deal with these difficult questions.
The way I see it, it’s all about risks. And while the risks and issues related to renewable energy are by no means insignificant, there is sufficient evidence from other countries to suggest how these risks can be managed. Also, let’s not forget what we do know. We know for sure that in the long-term the price of oil increases. We know for sure that our total reliance on imported energy is economically unsustainable. With certainty, we know that we have access to an indigenous energy resource – at least in wind and solar. We also know that the current system has serious consequences for the environment.
If we focus more on what we know, and a little less on what we are uncertain about, then I have no doubt that the way forward will become much clearer to everyone.
From my own research, energy costs can be as much as much as 20% of the average Antiguan and Barbudan household budget – electricity, gas and LPG expenses. Today, the retail price of gas is 30% higher than a year ago, while the average fuel variation charge in 2011 is 15% more than it was 2010. In the recently released World Economic Outlook, the International Monetary Fund (IMF) cites a jump in food and oil prices as the biggest downside risk for commodity importing countries such as ours. Since we import 100% of the energy inputs as refined petroleum products – and I might add, a significant portion of our food – the risks to our economy and way of living are indeed real. Clearly, there are very compelling economic reasons for everyone; not only policymakers and utilities, to be concerned about energy.
For many years the Caribbean has been plagued by high and volatile fuel prices, with limited economies of scale or diversity of electricity supply. Notwithstanding years of policy statements, studies and pilot projects, the reality on the ground remains unchanged. In present day, electricity prices are among the highest in the world. The reasons for this are many and although the most common explanation offered by players in the energy sector suggest the price of oil and our small size as the main causes, some would argue that our capacity for energy production is no less than that for food production. The economic imperatives for indigenous energy sources, I would add, are perhaps even greater that food.
If you ask most players in the energy sector why there isn’t faster adoption of renewable energies in the Caribbean, they will quickly say that they are too expensive. Ask how much they cost, and you will be lucky to get an answer. That’s because renewable energy technologies are in fact a number of very different technologies grouped together for convenience. Some, like solar and wind are intermittent while some – e.g. geothermal – can provide a constant steady supply. Some are applicable for small scale distributed generation, while others are only suited for large utility scale projects. Some technologies are mature with predictable performance over time, while others are still in the early stage of development with a lot of unknowns. To complicate matters, there are up front costs, running costs, and environmental costs; all of which vary by technology, time and location. If you ask three experts in the field for the cost of energy from a particular renewable energy technology, it is likely that you will get three different answers. The truth is, there are enough moving parts that go into the price of renewables to make your head spin.
I humbly suggest that the main reason why Caribbean utilities and Governments have not acted more aggressively in adopting renewable energy is due to one thing: uncertainty. Think about it - why should a utility radically change a business model that works with a guaranteed, regulated return on investment when the alternative is filled with so many unknowns? Why should governments risk disrupting an energy system that is reasonably reliable and remains accessible – at least for the time being - to the average consumer? Let’s face it; these are serious questions that can’t be brushed aside. While there is no doubt a level of social consensus on the need to diversify our energy supply, far more engagement from the public will be needed to help our policymakers deal with these difficult questions.
The way I see it, it’s all about risks. And while the risks and issues related to renewable energy are by no means insignificant, there is sufficient evidence from other countries to suggest how these risks can be managed. Also, let’s not forget what we do know. We know for sure that in the long-term the price of oil increases. We know for sure that our total reliance on imported energy is economically unsustainable. With certainty, we know that we have access to an indigenous energy resource – at least in wind and solar. We also know that the current system has serious consequences for the environment.
If we focus more on what we know, and a little less on what we are uncertain about, then I have no doubt that the way forward will become much clearer to everyone.
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